Narrative Regulatory judgement
- Provider: Your Housing Group Limited
- Regulatory code: L4203
- Publication date: 16 December 2020
- Governance grade: G2
- Viability grade: V2
- Reason for publication: Viability regrade
- Regulatory route: Stability Check and Reactive Engagement
This regulatory judgement regrades our previous published assessment of Your Housing Group Limited’s viability from V1 to V2 following a Stability Check and Reactive Engagement. It also confirms Your Housing Group Limited’s existing G2 grade.
The regulator has assurance that Your Housing Group Limited (YHG) complies with the financial viability element of the Governance and Financial Viability Standard and that its financial plans are consistent with and support its financial strategy.
Following an external review of its 30 year planned investment programme, YHG has substantially increased the level of asset management spending forecast in its business plan. This is intended to address a historic investment backlog, as well as to deliver other major works and health and safety compliance priorities. While YHG has renegotiated its covenants to provide sufficient headroom, this significant scaling up of asset management spending alongside its existing development programme requires a material increase in debt, with additional finance needing to be raised. As a result, YHG’s financial profile is weaker, with reduced operating margins and a reliance on debt to meet interest costs in the early years of the business plan.
In addition, YHG has included significant cost savings in its plan to achieve forecast financial performance. Failure to realise these planned savings would increase YHG’s need for additional funding and further reduce operating margins.
The regulator’s assessment of YHG’s compliance with the governance element of the Governance and Financial Viability Standard is unchanged.
In our previous regulatory judgement for YHG, published in February 2020, we concluded that the provider needed to improve how it delivers its aims, objectives and intended outcomes for tenants and potential tenants in an effective, transparent and accountable manner.
A lack of clarity about YHG’s strategy, material shifts in plans and a number of abortive projects and schemes had limited the board’s ability to measure performance over time in delivering its strategic priorities. Underperformance against delivery of YHG’s objectives had not been robustly considered and there was evidence of under-investment in YHG’s existing homes.
YHG’s board had not demonstrated that it had ensured effective use of resources in line with its objectives and charitable status.
YHG has subsequently developed a governance improvement plan and has an action plan in place to address the weaknesses identified in its approach to asset management. With external input, YHG has reviewed its approach to business planning and made some improvement to stress testing. Further work is in progress to make improvements to YHG’s oversight and management of its risk exposures and the board’s approach to Value for Money.
Other providers included in the judgement
- Ascent Housing LLP 4724
- Frontis Homes Limited L4204
- Your Housing Limited L1700
About the provider
Origins
YHG is a charitable community benefit society, a registered provider and the non-asset holding parent of the group.
Registered Entities
There are three stock owning registered providers. Your Housing Limited is the principal operating subsidiary and is a charitable community benefit society formed in July 2017 following a group consolidation. Frontis Homes Limited is a non-charitable community benefit society. Ascent LLP, a for-profit registered provider, is a joint venture with Staffordshire Moorlands District Council.
Unregistered Entities
There are four active non-registered subsidiaries within the group:
- Fix360 Limited provides repairs and maintenance services to the group.
- Nuvu Development Limited and Your Housing (Development) Limited are property development companies.
- Nuvu Living LLP, a property partnership, is 99.99% owned by YHG and 0.01% by Nuvu Development Limited.
Geographic Spread and Scale
The group is based in Warrington and operates across the north west, Yorkshire and the Midlands.
YHG owns and manages about 26,800 homes. The majority of its homes are for general needs, but it also provides supported housing, retirement living, key worker and shared ownership housing.
Staffing and Turnover
The group employs the full time equivalent of 1,014 staff. Its turnover for the year ended 31 March 2020 was £150.9m.
Development
YHG’s 2020/21 business plan includes planned development of 2,963 units over five years. This includes YHG’s commitments through its strategic partnership with Homes England.
About our judgements
Key to Grades
Governance:
- G1 (Compliant): The provider meets our governance requirements
- G2 (Compliant): The provider meets our governance requirements but needs to improve some aspects of its governance arrangements to support continued compliance
- G3 (Non-compliant): The provider does not meet our governance requirements. There are issues of serious regulatory concern and in agreement with us the provider is working to improve its position.
- G4 (Non-compliant): The provider does not meet our governance requirements. There are issues of serious regulatory concern and the provider is subject to regulatory intervention or enforcement action.
Viability:
- V1 (Compliant): The provider meets our viability requirements and has the financial capacity to deal with a wide range of adverse scenarios.
- V2 (Compliant): The provider meets our viability requirements. It has the financial capacity to deal with a reasonable range of adverse scenarios but needs to manage material risks to ensure continued compliance.
- V3 (Non-compliant): The provider does not meet our viability requirements. There are issues of serious regulatory concern and, in agreement with us, the provider is working to improve its position.
- V4 (Non-compliant): The provider does not meet our viability requirements. There are issues of serious regulatory concern and the provider is subject to regulatory intervention or enforcement action.
Definitions of Regulatory Processes
In Depth Assessment (IDA): An IDA is a bespoke assessment of a provider’s viability and governance, including its approach to value for money. It involves on-site work and considers in detail a provider’s ability to meet its financial obligations and the effectiveness of its governance structures and processes.
Stability Checks: Based primarily on information supplied through regulatory returns, a Stability Check is an annual review of a provider’s financial position and its latest business plan. The review is focused on determining if there is evidence to indicate a provider’s current judgements merit reconsideration.
Reactive Engagement: Reactive engagement is unplanned work which is triggered by new information or a developing situation which may have implications for a provider’s current regulatory judgement.
Stability Checks and Reactive Engagement: In some cases, we will publish narrative regulatory judgements which combine evidence gained from both Stability Checks and Reactive Engagement.
For further details about these processes, please see ‘Regulating the Standards’.
